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Lew calls for 0.5% cash rate cut

Premier Investments chairman Solomon Lew has called on the central bank to cut the official interest rate by 0.5 per cent to stimulate the economy and boost consumer confidence.

Mr Lew told reporters after the retailer's annual general meeting in Melbourne that the Reserve Bank of Australia (RBA) should cut the cash rate from 3.25 per cent to 2.75 per cent when it meets later on Tuesday.

"There is no doubt that the economy needs a cut," Mr Lew said.

"If you look at unemployment numbers, if you look at manufacturing, if you look at retail - all those sectors are struggling. How are they going to keep the economy going? - obviously there needs to be some stimulation."

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The RBA is widely expected to reduce the cash rate by 0.25 per cent, but Mr Lew said that a bigger cut was needed to have an impact.

"My personal belief is we need to get interest rates down to 2.75 per cent which is a 0.5 per cent cut and that should be done immediately," he said.

"I think if they're going to do a quarter and a quarter it's not going to be as effective.

"They're sending a message at 0.5 per cent."

He also called on the banks to pass on any interest rate cuts in full in order to help the economy.

"They may not pass on the full amount," he said.

"They should, but they have their own issues. I'd like to see the banks pass it on. I think it will help the economy."